NEW YORK, Nov 20 (Reuters) - CF Industries Holdings Inc (CF.N) took a major step toward completing its bid to buy Terra Industries Inc TRA.N on Friday when three nominees proposed by CF were elected to Terra's board.

With its chosen slate elected, CF -- which itself is the target of a hostile takeover effort by Agrium Inc AGU.TO -- may face pressure to settle a deal to buy Terra quickly, as its financing with Morgan Stanley (MS.N) expires on Nov. 30.

Terra shares rose 5 percent to $40.03 after the vote, while CF shares fell 0.2 percent to $82.71, both on the New York Stock Exchange.

The vote, which is preliminary for at least five business days, will give CF three of the eight spots on the Terra board, which will now likely be pressed to open negotiations with CF.

Terra shareholders removed three board members, including Chairman Henry Slack, and installed John Lilly, David Wilson and Irving Yoskowitz. The CF slate did not attend the meeting.

"CF's really got their teeth in Terra now. I don't know if any more evasive maneuvers are going to be all that constructive," said Morningstar analyst Ben Johnson.

The nearly year-long, three-way takeover battle between Agrium, CF and Terra has put the spotlight on the three companies and the increasingly hot fertilizer sector.

The industry has been rife with both proposed and rumored mergers, as many believe the world's growing demand for food and biofuel will lead to sustained growth and soaring profits.

CF Chief Executive Stephen Wilson, who attended the shareholder meeting in New York and shook hands with Terra Chief Executive Michael Bennett after the vote was announced, said it was time for the companies to "move forward."

"We're focused on the Terra combination," Wilson told Reuters. "Today is an important event in that process."

Bennett -- whose seat on Terra's board was not up for vote -- told investors CF's proposal "lacks compelling strategic logic" and stressed a tie-up is not a foregone conclusion.

"We have not had a unanimous decision from shareholders about anything," he said at the meeting, which was attended by roughly 80 investors, arbitrageurs and advisers at the U.S. headquarters of Credit Suisse (CS.N).

The preliminary vote count had the CF slate taking roughly 45 percent of the shares outstanding and Terra's directors with around 35 percent, according to a source familiar with the matter. As of late September, CF owned about 7 percent of Terra's shares.

Around 85 percent of Terra's outstanding shares were voted in the proxy fight, the source said.

The vote will give CF some breathing room in its fight against suitor Agrium after more than 60 percent of CF shareholders agreed to tender their shares under Agrium's $5 billion hostile offer earlier this week.

For a timeline of the so-called Agrium-CF-Terra "fertilizer wars," visit: here

"This makes it harder for Agrium to succeed in its bid for CF because, as long as CF believes they can pursue Terra, they don't have to get in bed with Agrium," Broadpoint AmTech analyst Edlain Rodriguez said. "That said, I don't think Agrium is going to give up that easily."

More than 60 percent of CF shares were tendered into Agrium's nearly $5 billion offer yesterday, but CF has takeover protections in place and can continue to stymie a deal.

"The Terra vote is irrelevant to Agrium's offer for CF," Agrium said in a statement. "CF's board has an obligation to its own stockholders, who have sent a clear and unambiguous message that they want this deal which is currently valued over $100 per share."

A PROTRACTED TUSSLE

Deerfield, Illinois-based CF, which first moved to buy Terra last January, is currently offering $24.50 in cash and 0.1034 of a share for every Terra share.

Terra's incumbent board has also declared a special dividend of $7.50 a share, which stockholders will receive on Dec. 11 whether the company reaches a deal with CF or not.

The current value of CF's bid is $33.07 without the dividend and $40.57 with it. Including the dividend, the deal is worth roughly $4.05 billion, based on Thursday's close.

Jeff Doppelt, whose family owns 186,000 shares of Terra, called CF's latest offer a "joke" and said he would prefer an offer in the $48 to $50 range.

Doppelt voted for CF's slate "with mixed emotions" due to his strong confidence in Terra's management and assets.

"I voted for the concept" of a CF-Terra combination, Doppelt told Reuters after the meeting. "However, I want shareholders to get the best value."

Terra's current board had nominated three of its own candidates and both sides have aggressively courted shareholders in the past few months, all but begging for support.